Potential Justice Department lawsuit threatens Apple, which is under scrutiny around the world

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Apple Inc. has consistently touted itself as a privacy-conscious company, but that does not protect the company from regulators.

The Department of Justice is about to file a high-profile antitrust complaint against Apple AAPL,
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the culmination of a two-year investigation, according to an October report Information report. This investigation would also not be deterred by the recent ruling in the Epic Games v. Apple, in which Apple has largely was pushing back complaints from the maker of “Fortnite” and was not found to violate federal antitrust regulations.

Much of the acrimony targeting Apple focuses on the same problem at the heart of the Epic affair – ongoing fees of up to 30% of revenue developers have to pay when they sell apps and virtual goods on the App. Store. Apple is forcing developers to use its own payment processing system and preventing apps from directing users to other payment methods that would bypass the so-called Apple tax.

“Apple charges a tax, a tax, because of its status as a walled garden,” said Sen. Richard Blumenthal, D-Conn., Co-author of the Open Application Markets Act, said MarketWatch.

The Epic case caused some setback from Apple, despite a huge court victory in December, when an appeals court stayed the execution of an injunction that would have forced Apple to allow payment options external on its App Store by December 9. Over the past few months, the company has reduced its fees by 30% to 15% for some apps, including those that make less than $ 1 million a year, news apps, and some premium video streamers that participate in an Apple program. It also agreed to allow app makers to direct their consumers to payment options outside of the App Store, which could allow developers to avoid paying fees of up to 30%.

But that doesn’t stop an all-out attack on Apple’s practices around the world. Apple faces a antitrust investigation in Europe after Spotify filed a complaint about Apple Music, and bipartisan Senate legislation would ban Google GOOGL from Apple and Alphabet Inc.,
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to oblige developers to exclusively use their application payment systems, as well as to price and classify their applications favorably in relation to competing brands.

The UK’s Competition and Markets Authority published a report on mobile ecosystems in December which concluded that “Apple and Google have developed a grip on the way we use mobile phones and we are concerned that this will cost money. million people across the UK. “said Andrea Coscelli, CEO of CMA.

South Korean law already prohibits dominant app store operators like Apple and Google from forcing app developers to use their payment systems.

Meanwhile, Apple’s decision to update its mobile privacy settings this year and make it harder for developers to track user data has further increased scrutiny from regulators, who have noted the complaints of Snap Inc. SNAP,
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Facebook parent Meta Platforms Inc. FB,
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and Peloton Interactive Inc. PTON,
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on the deleterious financial impact of Apple’s move.

All three companies called Apple’s change an anti-competitive move to suppress ad revenue as Apple increasingly engages in advertising. Indeed, in a November 11 memo, Bernstein analyst Toni Sacconaghi said he believed Apple could get a multibillion-dollar increase in advertising revenue from its privacy changes.

Apple’s privacy defense

Apple has always maintained that lawmakers should prioritize passing laws to protect consumer data. It also insists that it has erected the most secure and privacy-friendly platform with the App Store. Opening up its platform, they claim, dramatically increases cybersecurity risks for consumers to “bad guys and the spread of more malware,” Patrick Hedger, vice president of policy at the Taxpayers Protection Alliance Foundation, who has launched a new initiative, called Application security project, said MarketWatch.

“Apple’s App Store creates great opportunities for developers to grow their businesses and is a safe and reliable market for users who want to download the apps they love,” an Apple spokesperson said. at MarketWatch. “We are and always have been convinced that competition and innovation drive us all forward and we are constantly evolving to make the App Store even better. We really want to work with policymakers to create laws that help compete while protecting the privacy and security of user data.

The topic of mobile advertising settings, meanwhile, is one where privacy could potentially get Apple into antitrust trouble.

During his conference call with analysts in November, Apple CEO Tim Cook was asked whether the company’s advertising business was benefiting from the IDFA change. Cook would only suggest that consumers are in favor of the change, and Apple’s only motivation is to protect their privacy, but analysts have pointed out that Apple’s advertising business, especially in the App Store, would benefit from changes that hurt other digital advertising companies.

Read more: As Apple’s privacy change hampers Facebook and others, its own advertising business should benefit

Craig Federighi, senior vice president of software engineering at Apple, relaunched the company’s line at the Web Summit conference in Lisbon in November. He generally praised the “admirable goals” of the EU digital markets law, but denounced the download provision, saying it “would take away a more secure iPhone” and open a “side door” for cybercriminals to potentially access consumers’ personal information.

“European policymakers are ahead of the curve, but sideloading would open a Pandora’s Box of compromised security,” Federighi said to muffled applause. “Sideloading is cybercriminals’ best friend, and providing it would be a gold rush” for identity thieves, he added.

The Biden administration entered the debate this month, with opposition to the digital markets law on the grounds that it would require U.S. tech companies to provide their competitors with information protected by intellectual property law. One of President Joe Biden’s top advisers, Cynthia Hogan, worked as a senior lobbyist for Apple from 2016-20. Hogan left her post as vice president of public policy and government affairs at Apple to join the Biden campaign and his vice-presidential selection team.

The board game in Silicon Valley these days is how far litigation and legislation should go with Big Tech. Like many out there, venture capitalist John Doerr recognizes the “growing tech clash,” but not over-regulation that stifles innovation.

“I am a supporter of federal standards of privacy legislation,” Doerr told MarketWatch. “What I am not in favor of is legislation that would curb mergers and acquisitions and hurt the industry.”


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